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Can I afford it?

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  • Avatar AZPT 
    Participant
    Status: Other Professional
    Posts: 76
    Joined: 02/02/2019
    Earnest refinancing bonus

    Hi everyone,

    I am new to the forum but have been following WCI posts for a few years now, and love the insight.

    A little about me – I am a Physical Therapist in AZ who has been in practice for ~7 years in the Home Care field. My wife is a Pediatric PA. We both work full-time and have one young son at home with another due in September.

    I have been thinking more about a topic recently that I would love other opinions on. This post is going to date me as an entitled, lazy, and otherwise ignorant Millennial, but at least hear me out 🙂

    When CAN I ‘afford it’?

    I primarily work with older adults given my practice niche, and my perspective on saving, investing, spending has become influenced by some of the experiences I have had with these folks. I run into so many 60+ folks that, regardless of financial decisions made, have been hampered by health/family/life events which have impacted their recent & later years. It seems like the cliche you hear frequently: “When you have the time you don’t have the money, and when you have the money you don’t have the time”.

    As a reader of WCI, someone who has tried to become much more financially-savvy than in my previous non-professional life, and as a new ‘Dad’,  I have such an internal struggle when it comes to this tug of war. I constantly get this sense that you shouldn’t be purchasing anything until your debts are paid. I get this feeling of guilt when I make a purchase instead of putting even more towards my student loan debt (down from $250k combined to $50k currently). I feel guilty for even looking at a 2014 vehicle to replace my 2008, because “damnit, you should be buying a 1996 Civic because you still have student loans!”

    I don’t want to be that person who does it all ‘right’ financially, without splurging or maximizing life’s experiences, only to find out I have Colon cancer at age 56 and all those planned years of “retirement” now suddenly don’t matter anymore. Disclaimer: *Of course there is the fine balance that I also would never completely ignore my financial future and not prioritize saving and investing.*

    I acknowledge that my financial situation isn’t similar to many of yours as Physicians purely based on yearly and career income potential. My wife and I are likely to never significantly surpass $100k each (per year) for our careers (Currently at $170k combined). I won’t have the good fortune of making $300k per year and sacrificing just one year of expenses to pay off all debts and then rapidly accumulate wealth for all my future years to come.

    This is a long-winded way to ask:

    When does it really matter if you can “afford it”? Whether that means buying the new truck, splurging on the Europe vacation, or getting the weekend camper you’ve always wanted?

    I know I need to pay off debt. I know saving is important. I know investing is important. I know I need to have much more for retirement than I could ever imagine.

    But, I also know that me living beyond age 50 isn’t guaranteed. I know that my kids will only be “5” once. I know that my body will be able to best withstand certain activities NOW instead of 25 years down the road.

    Maybe I am crazy, but that’s why I am here and asking for input. Even after paying off close to $200k in 7 years since beginning my PT career, I just can’t shake this feeling that we aren’t getting anywhere and really won’t ever be able to afford anything. Keeping up with the Jones‘ is real. And I am feeling it’s effects.

    So, how do you decide where the happy medium is between spending and saving?

    #187624 Reply
    ENT Doc ENT Doc 
    Participant
    Status: Physician
    Posts: 3355
    Joined: 01/14/2017

    Depends on your current financial situation, goals, purpose, etc.

    You didn’t provide any details on the other liabilities or asset front, or where you are with respect to your financial goals. If you are woefully behind this should induce saving>>>spending. If you’re good to go then at least save so that your goals are met and feel free to have fun with the rest. But it starts with objective realities and goals. New kids change them too.

    To heck with the Jones’s. They’re probably all hat and no cattle.

    #187633 Reply
    CordMcNally CordMcNally 
    Participant
    Status: Physician
    Posts: 2510
    Joined: 01/03/2017

    Keeping up with the Joneses and finding the happy medium between spending and saving are entirely different problems with different solutions. I’ll address each separately.

     

    Keeping up with the Joneses is largely dependent on what kind of person you are. I don’t really value material things much so I tend to not be affected by these things. I also have been off social media for a while (which has been a fantastic experience) so I don’t see the highlights of other people’s lives. Most of our friends are not extravagant spenders and value a lot of the same things that we do (experiences, travel, etc.).

     

    Finding the happy medium between spending and saving is largely a math problem. Start at the end and work backwards. How much do you need for retirement? I generally use a historically low rate of return of 5% for my calculations. Figure out how long you want to work and how much you need to save each month to reach your goal. That will give you a good idea of how much you can spend each month or year without impacting your retirement savings.

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    #187635 Reply
    Liked by AZPT
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 7797
    Joined: 01/09/2016

    You need context and perspective. It sounds as if you are doing many things right, at least if I use your student loans as an example. It’s difficult to be able to comprehend that where you are today is not where you are going. You haven’t gotten rid of all the debt yet, for example, and you really won’t have that feeling of freedom and moving on to the next stage until you are no longer making payments.

    You use good judgment and common sense for the smaller luxuries and you need to follow a budget. For the big ticket things, you really need a financial plan. The cost-effective way to go about that is to DIY. Get WCI’s Fire Your Financial Advisor course and go through it step-by-step. I haven’t taken the course, but I sense it focuses on education and baby steps more than on a comprehensive financial plan. That is a great place to start.

    If you really want to see the big picture, connect all the dots, and get a second opinion, you might consider fee-only financial planning, maybe a financial checkup. That’s the only way I know of that you’re going to get a 30,000 foot lifetime look at your overall plan and the impact of the various choices you have. That may be more than you want after you pay off the student loan debt and experience the freedom that comes with it.

    Maybe you aren’t earning doctor incomes, but you guys are doing better than most middle-class Americans. Depending on your goals, it might be possible to cut back for awhile and plan to work longer, retire with less, save for only 2 years of college, save for a smaller house, etc. Your income level gives you flexibility, which means you are not stuck on a straight path with no other choices or wiggle room.

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #187636 Reply
    Liked by AZPT
    White.Beard.Doc White.Beard.Doc 
    Participant
    Status: Physician
    Posts: 843
    Joined: 02/06/2016

    I want to ask this question in a different way.  We are all so caught up in the modern consumerist paradigm, it is kind of mind boggling.

    If you drive the old Honda Civic that gets you wherever you need to go, and you compare that to driving a shiny new Tesla that will also get you to those same places, has borrowing from your future for that new Tesla enhanced your life?  Has taking on debt enhanced or harmed your life?  Is driving that reliable, old Honda equated with living a deprived life?

    I say no, to hell with the new Tesla.  I actually drive a Tesla now, but it is likely because I drove a Honda for many years and I was perfectly happy.  The only reason I drive a Tesla now is because I can own it without it affecting my lifestyle or bank account one bit.  But if circumstances were different, I can assure you that my life would be equally rewarding if I were still driving a Honda with 200k miles.

    On another note, among many colleagues, the seniors are all cycling, hiking, kite surfing and traveling the world.  Life happens, and bad health can be unpredictable, however, among my peer group the vast majority of those who are educated and take care of their bodies are looking at good health well into their senior years.  Your experience is skewed by selection bias due to your line of work.

    If you have the opportunity to have interesting experiences, take that opportunity.  And yes, take it while you are young.  But so many great experiences don’t cost very much.

    We try to find balance in our lives.  Meaningful work, meaningful play, time with family, giving back, continuing to learn, and travel to interesting places.  Life is so much more than the material goods that we find ourselves surrounded with.

     

    #187639 Reply
    MPMD MPMD 
    Participant
    Status: Physician
    Posts: 2287
    Joined: 05/01/2017

    i think johanna is on the right page her for the OP. it sounds like you need a bit better sense of your goals and glidepath and it might be worth paying for that.

    i agree that this forum can skew very conservative when it comes to money. it’s the nature of the internet, very few people are going to hop on a forum and talk about their $700 truck payment especially a forum like this.

    OP i am with you, i drink expensive booze, take lavish trips, my wife drives a luxury suv, and we live smack dab in the middle of a big city. i am not into FIRE porn either.

    but i was/am pretty careful about only spending from my surplus. you can always afford it if it’s extra money after your goals are met.

    you also have to figure that as a PT you are only meeting people who have something wrong with them (compare to a dentist or even a PMD). that’s part of the challenge of working in health care a lot of us see people on their worst days.

     

    #187641 Reply
    Avatar AZPT 
    Participant
    Status: Other Professional
    Posts: 76
    Joined: 02/02/2019

    Depends on your current financial situation, goals, purpose, etc.

    You didn’t provide any details on the other liabilities or asset front, or where you are with respect to your financial goals. If you are woefully behind this should induce saving>>>spending. If you’re good to go then at least save so that your goals are met and feel free to have fun with the rest. But it starts with objective realities and goals. New kids change them too.

    To heck with the Jones’s. They’re probably all hat and no cattle.

    I really appreciate all the replies and different perspectives, as this is exactly what I was hoping for.

    Yes, I completely understand it’s hard to fully evaluate my situation without knowing all the other liabilities, assets, current budget, etc.  I can provide those in detail if this thread takes that route.

    Keeping up with the Joneses and finding the happy medium between spending and saving are entirely different problems with different solutions. I’ll address each separately.

     

    Keeping up with the Joneses is largely dependent on what kind of person you are. I don’t really value material things much so I tend to not be affected by these things. I also have been off social media for a while (which has been a fantastic experience) so I don’t see the highlights of other people’s lives. Most of our friends are not extravagant spenders and value a lot of the same things that we do (experiences, travel, etc.).

     

    Finding the happy medium between spending and saving is largely a math problem. Start at the end and work backwards. How much do you need for retirement? I generally use a historically low rate of return of 5% for my calculations. Figure out how long you want to work and how much you need to save each month to reach your goal. That will give you a good idea of how much you can spend each month or year without impacting your retirement savings.

    Click to expand…

    I like the idea of working backwards, though admittedly it scares the absolute hell out of me to find out what it is we “need” compared to what it is we are currently on track for.

    You need context and perspective. It sounds as if you are doing many things right, at least if I use your student loans as an example. It’s difficult to be able to comprehend that where you are today is not where you are going. You haven’t gotten rid of all the debt yet, for example, and you really won’t have that feeling of freedom and moving on to the next stage until you are no longer making payments.

    You use good judgment and common sense for the smaller luxuries and you need to follow a budget. For the big ticket things, you really need a financial plan. The cost-effective way to go about that is to DIY. Get WCI’s Fire Your Financial Advisor course and go through it step-by-step. I haven’t taken the course, but I sense it focuses on education and baby steps more than on a comprehensive financial plan. That is a great place to start.

    If you really want to see the big picture, connect all the dots, and get a second opinion, you might consider fee-only financial planning, maybe a financial checkup. That’s the only way I know of that you’re going to get a 30,000 foot lifetime look at your overall plan and the impact of the various choices you have. That may be more than you want after you pay off the student loan debt and experience the freedom that comes with it.

    Maybe you aren’t earning doctor incomes, but you guys are doing better than most middle-class Americans. Depending on your goals, it might be possible to cut back for awhile and plan to work longer, retire with less, save for only 2 years of college, save for a smaller house, etc. Your income level gives you flexibility, which means you are not stuck on a straight path with no other choices or wiggle room.

    Click to expand…

    You are so right, it is hard for me to “see where I’m going” instead of just where I am. Fee-only financial planning may be beneficial for this. I will also look into the Course. Thanks.

    I want to ask this question in a different way.  We are all so caught up in the modern consumerist paradigm, it is kind of mind boggling.

    If you drive the old Honda Civic that gets you wherever you need to go, and you compare that to driving a shiny new Tesla that will also get you to those same places, has borrowing from your future for that new Tesla enhanced your life?  Has taking on debt enhanced or harmed your life?  Is driving that reliable, old Honda equated with living a deprived life?

    I say no, to hell with the new Tesla.  I actually drive a Tesla now, but it is likely because I drove a Honda for many years and I was perfectly happy.  The only reason I drive a Tesla now is because I can own it without it affecting my lifestyle or bank account one bit.  But if circumstances were different, I can assure you that my life would be equally rewarding if I were still driving a Honda with 200k miles.

    On another note, among many colleagues, the seniors are all cycling, hiking, kite surfing and traveling the world.  Life happens, and bad health can be unpredictable, however, among my peer group the vast majority of those who are educated and take care of their bodies are looking at good health well into their senior years.  Your experience is skewed by selection bias due to your line of work.

    If you have the opportunity to have interesting experiences, take that opportunity.  And yes, take it while you are young.  But so many great experiences don’t cost very much.

    We try to find balance in our lives.  Meaningful work, meaningful play, time with family, giving back, continuing to learn, and travel to interesting places.  Life is so much more than the material goods that we find ourselves surrounded with.

     

    Click to expand…

    You are correct on many different fronts. I think it’s a good perspective to ask “will this purchase have an impact on my lifestyle or back account?” Unfortunately, I think the answer will pretty much be ‘Yes’ for most things currently. That might be the wake-up call I need though, to understand that we simply “can’t afford it” currently.

    I definitely acknowledge there are plenty of seniors doing amazing things and that selection bias has likely had an influence on my overall perspective. The unknown of later life is challenging; if I know I will be around long enough to enjoy the Snowbird, traveling abroad lifestyle for 20+ years, then sure I am all-in on saving every penny now to make that happen sooner than later. But without that being for certain, society keeps reminding you “you’ll only be age _____ once”, and I fear for missing out on opportunities and some of the frills that may not be financially recommended, but sure make for a fun life 🙂

    I appreciate your perspective, and it sounds as though you and your circle have very fulfilling lives and have been able to do it without breaking the bank.

    i think johanna is on the right page her for the OP. it sounds like you need a bit better sense of your goals and glidepath and it might be worth paying for that.

    i agree that this forum can skew very conservative when it comes to money. it’s the nature of the internet, very few people are going to hop on a forum and talk about their $700 truck payment especially a forum like this.

    OP i am with you, i drink expensive booze, take lavish trips, my wife drives a luxury suv, and we live smack dab in the middle of a big city. i am not into FIRE porn either.

    but i was/am pretty careful about only spending from my surplus. you can always afford it if it’s extra money after your goals are met.

    you also have to figure that as a PT you are only meeting people who have something wrong with them (compare to a dentist or even a PMD). that’s part of the challenge of working in health care a lot of us see people on their worst days.

     

    Click to expand…

    Thank you for posting this, I needed to hear it. Sometimes on this website I frankly become overwhelmed reading about others’ financial situations, income/savings numbers, near-perfect restraint against impulse purchases, and such financially frugal lifestyles. I sometimes wonder, man, do these people spend ANY of their money? Likewise, I will see a post about a 39yo with a 401K worth $500k, yet they are discouraged that they aren’t saving enough. It’s easy, at least for me, to become further discouraged by this and downward spiral towards “screw it, if I can’t even save one-fifth of what they have, then what’s the point?”

    Sorry, not to sound dramatic, but just stating the raw feeling this sometimes invokes. I likely need a mentality switch to better accept that: not everyone’s financial situation or goals are the same, and that it’s ok.

    #187646 Reply
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 2629
    Joined: 09/18/2018

    @azpt,
    When can I Afford It?
    It depends on It and I. What do you want for you and your wife and child? I hear your “Jones” and travel in Europe nomad plans. And the car thing that has be around for decades. Bottom line is the loans have you burnt out. The reality is it’s your choice.
    Income to taxes, debt payments , retirement saving and living expenses.
    You are taking steps for the first three. The result is living expenses. Some of the numbers saved for retirement exceed most people’s total incomes. Geez!
    The great thing you have done is attack your debt. After taxes that means split between savings and spending. Make your spending plan with what you have. Maybe a used car avoids debt and allows a trip to Disney once!
    That’s a choice that’s feasible. Actually, a FLA beach might be half the price. That’s two vacations. Camping at Lake Havasu would probably even be a better value.
    You have been “window shopping “ rather than seriously looking for the exact present for you and your family.
    If you spending budget doesn’t “allow” a trip, then campout in the backyard. Hike and cook scrambled eggs on a grill. No European Riverboat Cruises. A nice steak with wine or drinks is a whole lot cheaper that a $10 salad. Spend wisely doesn’t mean don’t spend. Your headed the right direction, quit being so hard on yourself. So , you can afford it now. What are you gonna buy? Debt paydown, savings or spend it? Good luck!

    #187670 Reply
    Liked by Kamban, AZPT, Anne
    Avatar Anne 
    Participant
    Status: Physician
    Posts: 1067
    Joined: 11/07/2017

    People always think that having abc will make them happier. Until they get abc and in just a little bit they want def. And so on and so on.

    I bet you go into some homes that are absolute dumps. Make that your basis for comparison. Seriously. Quit looking at people who have more. No matter how much you have someone will always have more. Unless you are the richest person in the world, at which point someone will still have more of something you don’t have that money can’t buy.

    At 170k, your take home is probably 120-135k or so. That is a ton. Enough to pay off your remaining 50k in a year. And enough to put a decent amount into retirement at the same time.

    Prognosis for the 56 yo with colon cancer is actually pretty good in many cases. You know what sucks? Dealing with treatment, chemotherapy side effects, etc. while stressing about the fact that you hardly having anything saved for retirement.

    Yes your kid is only 5 once. Most 5 year olds only want some of your time. They don’t care if you go camping in a fancy camper or in a tent. They are just as happy at the local swimming hole as they are on an international vacation (probably more so, as jet lag tends to be hard on them IMLE)

    Work on your contentment. Make some smaller splurges to see if it really provides sustained happiness. My guess is it won’t. Spend on what brings value to your life, not that which impresses others. If impressing others is what brings value to your life, work on that. Focus on helping people who have less than you. There are a lot of them out there.

    #187672 Reply
    IlliniGopher IlliniGopher 
    Participant
    Status: Physician
    Posts: 89
    Joined: 05/03/2017

    I finished my student loans and was happy, but not nearly as much as I had expected.  A little anti-climactic actually.  Now I am working on my wife’s loans more aggressively, but in the meantime I treated myself to a nice watch.  Would it have been smarter to put that money towards my wife’s loans?  Yes.  But I have so much joy after the watch and catch myself admiring it often.

    I think to your original question, be disciplined but enjoy yourself at the same time.  Can’t be miserly about money.  When I turn 40 I am gonna definitely buy a 550M.  Is that smart?  No, but I didn’t have a poster of my net worth dreams on the wall.  It was of a BMW.

    #yolo #millenial #avocadotoastFTW

    "Comparison is the thief of joy." - Teddy Roosevelt

    CM CM 
    Participant
    Status: Physician
    Posts: 1094
    Joined: 01/14/2017
    I know that my kids will only be “5” once.

    Click to expand…

    My parents had much less money than you, but I had a terrific childhood. We had family parties, nights at the drive-in movies, and block parties with the kids and their parents from the neighborhood.

    My dad took us hunting, fishing, and camping. It turns out that I don’t like any of those things, but I loved doing them with my dad.

     

    You earn more than 99.95% of the people in the world (http://www.globalrichlist.com/). You can have a rich and fulfilling life on much less.

    Erstwhile Dance Theatre of Dayton performer cum bellhop. Carried bags for Cyd Charisse (gracious). Hosted epic company parties after Friday night rehearsals.

    #187695 Reply
    MPMD MPMD 
    Participant
    Status: Physician
    Posts: 2287
    Joined: 05/01/2017
    Click to expand…

    Thank you for posting this, I needed to hear it. Sometimes on this website I frankly become overwhelmed reading about others’ financial situations, income/savings numbers, near-perfect restraint against impulse purchases, and such financially frugal lifestyles. I sometimes wonder, man, do these people spend ANY of their money? Likewise, I will see a post about a 39yo with a 401K worth $500k, yet they are discouraged that they aren’t saving enough. It’s easy, at least for me, to become further discouraged by this and downward spiral towards “screw it, if I can’t even save one-fifth of what they have, then what’s the point?”

    Sorry, not to sound dramatic, but just stating the raw feeling this sometimes invokes. I likely need a mentality switch to better accept that: not everyone’s financial situation or goals are the same, and that it’s ok.

    Click to expand…

    Joyless saving ends up better off long term than wanton spending but it’s not fun.

    Any behavior can be pathological if done immodestly. I know people <40 w/ NW over a million already who can’t open their wallet to buy a round of drinks. What is the fun in that? One starts to think of the Ebeneezer Scrooge.

    #187713 Reply
    Drop it into MD Drop it into MD 
    Participant
    Status: Physician
    Posts: 440
    Joined: 09/20/2018

    Get out of debt.  Pay yourself first 20% towards retirement if you plan to work until normal retirement age.  More if you want to retire early.  If you are doing that then spend what is left.  That is what you can afford.

    #187981 Reply
    Liked by AZPT, Kamban
    Zaphod Zaphod 
    Participant
    Status: Physician, Small Business Owner
    Posts: 5943
    Joined: 01/12/2016
    Click to expand…

    Thank you for posting this, I needed to hear it. Sometimes on this website I frankly become overwhelmed reading about others’ financial situations, income/savings numbers, near-perfect restraint against impulse purchases, and such financially frugal lifestyles. I sometimes wonder, man, do these people spend ANY of their money? Likewise, I will see a post about a 39yo with a 401K worth $500k, yet they are discouraged that they aren’t saving enough. It’s easy, at least for me, to become further discouraged by this and downward spiral towards “screw it, if I can’t even save one-fifth of what they have, then what’s the point?”

    Sorry, not to sound dramatic, but just stating the raw feeling this sometimes invokes. I likely need a mentality switch to better accept that: not everyone’s financial situation or goals are the same, and that it’s ok.

    Click to expand…

    Joyless saving ends up better off long term than wanton spending but it’s not fun.

    Any behavior can be pathological if done immodestly. I know people <40 w/ NW over a million already who can’t open their wallet to buy a round of drinks. What is the fun in that? One starts to think of the Ebeneezer Scrooge.

    Click to expand…

    Goodness, thats sad. One of the great joys is the admittedly rare occasion of taking family or non physician friends out and paying for the experience. Its always a fight and you have to be clever to pay for it with most my friends.

    #187994 Reply
    Liked by AZPT
    Avatar Kamban 
    Participant
    Status: Physician
    Posts: 2357
    Joined: 08/01/2016

    Sometimes on this website I frankly become overwhelmed reading about others’ financial situations, income/savings numbers, near-perfect restraint against impulse purchases, and such financially frugal lifestyles. I sometimes wonder, man, do these people spend ANY of their money? Likewise, I will see a post about a 39yo with a 401K worth $500k, yet they are discouraged that they aren’t saving enough. It’s easy, at least for me, to become further discouraged by this and downward spiral towards “screw it, if I can’t even save one-fifth of what they have, then what’s the point?”

    Click to expand…

    As stated above, clear the debt. Then set the 20% gross savings, first in tax advantaged accounts and then in taxable. Pay taxes and spend the rest. That will get to to a normal retirement.

    There is always someone richer than you and someone poorer, even in the same field. So live for yourself. Put everything in context. The 39 yr with 500K in retirement plans had high income, started early and had the biggest bull market to aid him. But compared to some 20 year old entrepreneur kid who is worth $2 billion, he is poor. Everything is relative.

    AZ has great weather, especially now when the rest of us experience polar vortex. Enjoy it now.

    #188002 Reply
    Liked by Tim, AZPT

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